Federal Reserve Board Governor Michael S. Barr delivered a speech on “AI and Central Banking” outlining how generative artificial intelligence (GenAI) could reshape the economy and financial system, the risk controls needed as financial firms deploy it, and how the Federal Reserve is increasing the pace of its own AI adoption through an AI programme and governance framework. Barr described a wide range of possible economic outcomes from AI, citing rapid uptake of GenAI by large firms and early signs of labour market effects such as retraining plans alongside scaled-back hiring. He highlighted indicators of deepening integration in finance, including job postings and experimentation with AI in core activities such as credit decision support, fraud detection, and trading, while stressing requirements for well-controlled, legally precise, explainable, and replicable model-driven decisions and the need to reduce risks such as bias in consumer lending and market harms including tacit collusion, manipulation, volatility, and potential systemic risk. Within the Federal Reserve, AI use is being expanded on an enterprise-wide “learning-by-doing” basis for activities such as writing, coding, and research, with GenAI-enabled tools applied under guardrails to technology modernisation tasks including legacy code translation, unit test generation, and cloud migration, alongside continued work to assess AI’s implications for economic conditions, financial stability, supervision and regulation, and payment systems.

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